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Conference Board sees soft landing

08-17-2011 14:01 BJT

BEIJING - China will achieve a "soft landing" even as growth moderates after the government tightened monetary policy, The Conference Board Inc said as its main indicator for the economy rose.

The New York-based researcher's leading economic index for China increased 1 percent in June, it said in a release on Tuesday. The index climbed 0.6 percent in May and 0.3 percent in April.

The gain may ease concern that Europe's debt crisis and a weakening US recovery will weigh on growth in the world's second-largest economy. China's benchmark stock index has retreated 14 percent from its April high as the government stepped up efforts to cool the fastest inflation in three years.

"The economy is significantly moderating right now and also over the next couple of months," said Bart van Ark, the organization's chief economist. "We still expect it to be pretty much a soft landing."

Inflows of capital from trade and investment may help to sustain growth, while complicating central bank efforts to control the money supply and restrain inflation.

Foreign direct investment rose 20 percent to $8.3 billion in July, the Ministry of Commerce said in a statement on Tuesday.

The Chinese economy is cooling after the government raised interest rates and banks' reserve requirements and extended curbs on the real-estate market, adding to concerns about the outlook for the global economy.

Christine Lagarde, the International Monetary Fund's managing director, on Tuesday urged developed economies to support economic growth even as they make fiscal cuts.

The nation's expansion may slow to 9.2 percent in the third quarter from 9.5 percent in the second, the China Securities Journal reported, citing the State Information Center.

Beyond six months, the Chinese economy may face "more problems" as a result of bank lending that remains at levels that are probably not sustainable, van Ark said.

The nation needs to shift to more of a consumer economy and build more "social infrastructure rather than the hard infrastructure", he said.

"Growth in China is actually slowing more seriously than the headline numbers suggest," said Kevin Lai, an economist at Daiwa Capital Markets Hong Kong Ltd.

He said that trade volumes showed demand slowing "sharply" in China and the world.

A slowdown in Hong Kong has highlighted the threat of another global slump as weakness in the US economy and a debt crisis in Europe cap demand for exports. The city last week reported that gross domestic product contracted in the second quarter from the previous three months.

Editor:Yang Jie |Source: China Daily

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